GENEVA (ILO News) – Despite a dramatic decline in output as a result of the global financial and economic crisis, Germany’s labour market held up well compared with other countries. Although the economy shrank by 4.7 per cent in 2009, more than in most other countries, employment fell by only 0.2 per cent, whereas the average for the industrialised countries was five times worse than in Germany. This was the conclusion reached by the first comprehensive assessment of Germany’s policy to tackle the crisis, issued by the International Labour Organization (ILO) on Monday.

“The intelligent policy mix of economic stimulus, the clever use of labour market instruments, improvements to the social security system and lastly Germany’s effective social dialogue all helped Germany to overcome the crisis much more successfully than other countries“, said the author of the study, Steven Tobin. “Even youth, who are often the most vulnerable in such cases, fared reasonably well.”

During the downturn businesses cut working hours, not their workforce. They were able to fall back on working time accounts, in which workers had accumulated large amounts of overtime during the previous upturn, and help from the government, which considerably extended the existing possibilities for short-time working. At the same time the government reacted to the crisis with wide-ranging economic stimulus packages and social improvements, including pension guarantees.

In its report the ILO particularly focuses on the lessons to be learnt from Germany’s success in overcoming the crisis, and puts forward corresponding policy recommendations. Germany still faces huge challenges: over three million people are still looking for jobs, with almost half of them – 1.4 million – out of work for a year or more, and over 900 000 for more than two years, giving Germany one of the highest long-term unemployment rates in the industrialised countries. The first aim must therefore be to ensure that these people do not lose touch with the labour market. The ILO welcomes the rule introduced in July 2010 that case managers in job centres must not be responsible for more than 150 adults or 75 young people. This improvement must not fall victim to budget cuts. The ILO also recommends the provision of more training measures.

Secondly, the country needs to adjust to the decline in the number of workers resulting from the ageing population, which could affect growth prospects. The ILO believes it is crucial to increase the participation of previously under-represented groups – women, older workers and migrants – in the labour market. Here again, instead of focusing either on boosting the participation rates of older workers and women or on increasing inward migration, the ILO recommends a balanced policy mix, in which help for older workers and women is the most effective approach. Pension systems must give people an incentive to work longer, and employment opportunities and working conditions for older workers must be improved. To increase the female employment rate, which currently stands at only 53 per cent, the provision of childcare for children under 3 years old should be improved.

Thirdly, the ILO recommends an end to the protracted downward trend in investment. Between 1980 and 2006 investment as a percentage of GDP declined by more than six percentage points, more than double the decline in other industrialised countries. In order to stimulate investment activity – and thus the basis for the creation of new jobs – the government has a number of options. First it must improve funding conditions for SMEs. The “Wirtschaftsfonds Deutschland” credit fund set up during the crisis is an excellent example for possible future initiatives. Second, employment and labour incomes must once again be more closely linked to productivity. This would increase domestic demand and make the economy and therefore investment more attractive.

For any queries, contact:

Mr. Stefan Giffeler (Europe), giffeler@ilo.org, Tel.: +4122/799-6403

Mr. Steven Tobin (International Institute for Labour Studies), tobin@ilo.org, Tel: +4122/799-7873.